Alaco

22.07.2016 | Struggling Zimbabwe hoping for financial lifeline

Protests over the dire state of the economy gain traction as donors consider bailing out the debt-ridden country.

Reminiscent of the social media-driven protests that fuelled the Arab Spring, a charismatic Baptist minister has been galvanising opposition to President Robert Mugabe.  Evan Mawarire’s cyber-activism has been mobilising tens of thousands of Zimbabweans fed up with plummeting living standards and rampant corruption.  Earlier this month, Mawarire’s followers staged a national strike which shut down many businesses and public services, in one of the country’s biggest anti-government demonstrations in recent years.

However, Mawarire’s goals are more modest than those of the Arab Spring protestors.  He knows he has little hope of overthrowing Mugabe.  Instead, he is demanding a more accountable government.  His demands include the sacking of corrupt ministers, the payment of delayed public sector salaries, and the lifting of police roadblocks reportedly used by officers to shakedown drivers.  Mugabe has sought to silence Mawarire, but charges of subversion were recently thrown out of court.  The episode only served to rally support for the rebellious pastor, who launched his movement after struggling to pay his children’s school fees.

The latest protests come as the Zimbabwean economy lurches from one crisis to the next.  The government is practically broke.  Doctors, nurses and teachers have gone on strike over unpaid wages.  Such is the shortage of US dollars, which account for 90% of transactions, that officials have introduced import restrictions and limited cash withdrawals from banks.  The financial crunch has prompted the government to halve its 2016 growth forecast to 1.4 per cent, but even that is seen as optimistic.  Thousands of companies have either scaled back operations or closed.  Election promises to create some 2 million jobs are now looking hollow.  With unemployment at a staggering 90%, many Zimbabweans have to rely on petty trading, subsistence agriculture and remittances to get by.  To make matters worse, a drought is threatening up to 4 million people with famine.

Mugabe and his ruling Zanu-PF party have been mismanaging the economy for years.  In February, the President revealed that $15 billion of diamond production revenue had disappeared.  He blamed foreign mining companies, but his opponents are not convinced.  Controversial policies, such as the seizure of white farmers’ land and a requirement that foreign companies hand majority control to black Zimbabweans, have combined to deepen the economic malaise, culminating in hyperinflation, which resulted in the collapse of the Zimbabwean dollar in 2009 and the adoption of a multi-currency system.

A coalition government, including the opposition Movement for Democratic Change, steadied the ship in the early 2010s, but this proved to be a brief interlude in Zanu-PF’s otherwise ruinous stewardship of the country.  Throughout, Mugabe has fooled few in pinning the blame for the chaos on international sanctions imposed on him and his allies over allegations of electoral fraud and human rights abuses.  The country’s dismal prospects have led to foreign direct investment falling by nearly a quarter to $421 million in 2015, and now even long-time ally China is no longer prepared to bankroll the regime.

Amid concerns that Zimbabwe is facing a social implosion that could threaten the region, international donors appear willing to help stabilise the country, which has debts of over $8 billion.  In May the government agreed to pay back nearly $2 billion to the IMF, the World Bank and the African Development Bank, in order to secure new loans.  However, its failure to meet its own June 30 repayment deadline does not bode well.

IMF funding will likely come with demands for greater government accountability and significant economic reforms.  Some question Zanu-PF’s willingness to fulfil such conditions, and worry that a cash injection will merely strengthen its grip on power.  With the opposition fractured and largely ineffectual, the ruling party remains firmly in control, although infighting over Mugabe’s successor has exposed internal divisions.

The frail and increasingly erratic 92-year-old President stumbles on, while his government, seemingly distracted by the succession battle, struggles to deal with the current liquidity crisis.  Officials are planning to substitute scarce foreign currency with so-called bond notes, pegged to the US dollar and backed by a $200 million loan from the African Export-Import Bank.  But there is little public confidence in the measure, amid concern that, like the old Zimbabwean dollar, the new notes will eventually become worthless.

While western donors could offer Zimbabwe a lifeline, it looks like it will merely preserve the status quo.  Mawarire’s protest movement may morph into a party, which, together with former Vice-President Joice Mujuru’s new Zimbabwe People First party, could revive the opposition’s flagging fortunes.  They will be encouraged by the decision of the Zimbabwe war veterans' association, key Mugabe allies, to end their support for him.  But with elections due in 2018, the regime’s opponents are running out of time.